19341222_minutes.pdf

3996

A meeting- of the Federal Reserve Board was held in Washington

°11 Saturda--ey1 December 22, 1954, at 11:30 a. m.

liarp/4. Kroh as a comptometer operator in the division, with

114141"Y .t the rate of $1,320 per annum, effective as of the date upon

PRESENT: Mr. Eccles, GovernorMr. Thomas, Vice GovernorMr. HamlinMr. MillerMr. JamesMr. Szymczak

Mr. Morrill, SecretaryMr. Bethea, Assistant SecretaryMr. Carpenter, Assistant Secretary

The Board acted upon the following matters:

Memorandum dated December 18, 1934, from Mr. Smead, Chief ofthe t),

-Lvlsion of Bank Operations, recommending the appointment of Miss

whichene enters upon the performance of her duties after having passed

a' Batt P'''LaCtOry physical examination. The recommendation was approved

e members of the Board on December 21, 1934.

Approved.

Memorandum dated December 18, 1934, from Mr.

krector of the Division of4PDoirrtment, on a temporary

leric i/1 the division, with salarytive

bYt e

kties.The recommendation was approved by three members of the Board04 bee

Research and Statistics,

basis,

GoldenI,eiser,

recommending the

of Mrs. Mary Constance Seals as a

at the rate of'4120 a month, effec-

4801 the date upon which she

ember 21, 1934.

enters upon the performance of her

Approved.

Letter to Mr. O'Connor, Comptroller of the Currency,Nap reading

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Ii

399712/22/34 -2-

"There is transmitted herewith for your consideration ansPPlication of 'The Marine Trust Company of Buffalo', Buffalo,New York, a member bank, for permission to establish a branchat Lackawanna, New York, after absorbing the 'LackawannaNational Bank', Lackawanna, New York. The Marine Trust Companyof Buffalo and the Lackawanna National Bank are both controlledby the Marine Midland Corporation, Jersey City, New Jersey.

"Lackawanna has a population of 25,948 and adjoins Buffaloon the south. At the present time the city is served by thenational bank and The American Bank, a State member bank withdsPosits of approximately $650,0001 which is located about onemile from the office of the national bank. It is proposed tomerge the Lackawanna National Bank into The Marine Trust Companyof Buffalo and continue the operation of the office as a branch.

"At the present time The Marine Trust Company of Buffaloi8 oPerating 32 branches, of which 31 are located within the?itY limits of Buffalo and one at Snyder, New York, the estab-lishment of which was approved by you on October 2, 1954.

"The Superintendent of Banks and the banking board ofthe State of New York have approved the proposed merger and:Ttablishment of a branch at Lackawanna subject to the sub-

of the proper merger papers and application for branch.'a$ Federal Reserve Agent at New York recommends approval of theaPPlication.

1. "It is recommended, therefore, that you approve the estab-,,lshment and operation of a branch in Lackawanna by The Marine4ruBt Company of Buffalo on condition that:

The establishment and operation of a branch atLackawanna, New York, by The Marine Trust Company ofBuffalo shall be approved by the appropriate Stateauthorities.

vi "The Federal Reserve Agent states that he has been ad-fils" by representatives of The Marine Trust Company of Buffaloin they propose to charge off or otherwise eliminate all:esss in loans and depreciation in securities shown by the

i;')carainer for the New York State Banking Department in his re-

t0 examination of examination of such bank as of September 281 19341 andri make some provision through reserves for the assets classi-fied as doubtful in such report. In view of this representa-rVn and the fact that appropriate corrections will bethVrsa in connection with the granting of a voting permit to

aolding company affiliate, the Board has not recommendedileorrection in the condition of The Marine Trust Company ofbrar:hl° in connection with this application to establish a


399812/22/3/1 —3—

"The report of examination of The Marine Trust Companyof Buffalo as of September 28, 193., is not yet available.However, the attached file contains a copy of a memorandumPrepared by the Board's Division of Examinations, togetherWith other pertinent data. It will be appreciated if youWill return this file when it has served your purpose, andWhen you have advised the Board of your action on theapplication described above."

Approved.

Letter dated December 21, 1934, approved by two members of

the Board, to Mr. Hoxton, Federal Reserve Agent at the Federal Re—

ereBank of Richmond, reading as follows:

"Reference is made to the report of examination ofthe 'Maryland Trust Company', Baltimore, Maryland, as ofSeptember 10, 1934, prepared by State bank examiners, andthe information submitted in connection therewith, particularlythe Copies of correspondence transmitted with Mr. Fry'sletter of December 12, 1934.

"The report of examination as of September 10 reflectsestimated losses of 409,000, depreciation of Z;;397,000 insecurities, and reserves for contingencies of 522,000. Inthis connection it has been noted that estimated losses in°ans as classified in the report of examination as of

'January 15, 1934, amounted to ;,11453,000, of which $959,000were charged off in connection with the capital readjustmentlast Spring, leaving estimated losses of ,:494,00U in loansaS compared with a reserve of Z;487,000.

"It has been noted that Mr. Fry has taken up with theBank Commissioner of Maryland the question of elimination of102ses and depreciation through application of the reserves,and that on December 8, 1934, Mr. Heyward E. Boyce, president°f the bank, informed the Bank Commissioner that the bank isconstantly working on the loans classified as loss or doubtful!Ild that losses will be charged to the reserve as possibilitiesf each case are exhausted. Mr. Boyce stated that in accordance"lth this policy a comparatively small amount would be charged

alt at the end of the year. It appears that the reply was not

114 oether satisfactory to the Bank Commissioner, who advisedMr FrY on December 10 that he had discussed the letter withZimmerman, vice president of the bank, who stated that the

,°Ehs would be reviewed before the end of the year and that'efinite losses would be charged to the reserve for contingencies.

"As you know, the Board feels that estimated losses anddePreciation listed for elimination have not been properlyelimin

ated by the setting up of reserves which are included


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M2/34 -4-

ftwith the bank's capital accounts in its published statements,but that such reserves should be used either in making charge-offs or treated as valuation reserves and deducted from theassets against which allocated, thereby showing only the netamount of the assets in the published statements.

"It is suggested that you continue to use your influenceto have the bank comply with the Board's policy and eliminateeither through charge-off or by the use of valuation reservesas described above depreciation in lower grade securities andestimated losses in other assets."

Approved.

Letter to Mr. Stevens, Federal Reserve Agent at the Federal

Ileservs Bank of Chicago, with regard to the steps which should be

4ken to correct the matters commented on in the report of examinationo1 t',

"Fletcher Trust Company", Indianapolis, Indiana, as of July 30,1 4,

Approved.

Letter dated December 21, 1934, approved by two members of the

to Mr. Wood, Federal Reserve Agent at the Federal Reserve Bank

t St, L°Ilis, reading as follows:

19z, "Receipt is acknowledged of your letter of December 15,requesting an interpretation of condition of member-

0i4-1i) numbered 7 prescribed in connection with the admissionti The Louisville Trust Company', Louisville, Kentucky, toenthershiP in the System, and which reads as follows:

7.Except with the permission of the Federal Re-serve Board, such bank shall not purchase oracquire through any device whatever any stockOf any other bank, trust company, or othercorporation of any kind or character except insatisfaction or protection of debts previouslycontracted in good faith; and all stock acquiredin satisfaction or protection of debts shall bedisposed of within six months from the date onwhich it was acquired unless the time is extendedby the Federal Reserve Board on the azmlication


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12/22/34 -5--

"of such bank for good cause shown.

"In this connection you refer to the following excerptfrom the Board's letter dated February 19, 1934, advisingthe bank of the Board's approval of the application formembership:

'The report of examination as of October 6, 1933,indicates that the bank has a large investment incorporate stocks. In this connection, your attentionis called to the fact that under the provisions ofSection 9 of the Federal Reserve Act, as amended bySection 5 (c) of the Banking Act of 1933, approvedJune 16, 1933, State member banks may not legally pur-chase stock in other corporations after that dateexcept in the limited classes of cases in whichnational banks may lawfully do so. In the circum-stances, consideration should be given to the advisa-bility of disposing of the stocks now held by the bankas soon as it is feasible to do so.'

"In vier of the condition of membership and the excerptreferred to, you request advice as to whether the condition

aPPlicable only to stocks acquired subsequent to the time4ne.bank was admitted to membership or whether it is theicipese of the Board that stocks acquired prior to that time?lr ha

disposed of in accordance with the provisions of con-dition numbered 7.

"Condition of membership numbered 7 is applicable to!tocksacquired subsequent to admission to membership and

Zoes not apply to stocks acquired in good faith prior toahat time. The Board, however, does not feel that stocks4.!:a suitable investments for the funds of member banks and

purpose of the comment in the Board's letter of February4i4) 1934, was to call to the attention of the bank applying

membership the legal restrictions regarding the purchasen stock and to suggest as a matter of sound banking policy(2.at consideration be given to the advisability of disposingwi the stocks then held by the bank, although such disposal48 not required under the condition of membership."

Approved.

Letter dated December 21, 1934, approved by two members ofthe

°41'cll to Mr. O'Connor, Comptroller of the Currency, reading asfollows,


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12/22/34 -6-

"In accordance with your recommendation, the FederalReserve Board approves a reduction in the common capitalstock of 'The First National Bank of Waterloo', Waterloo,New York, from 0100,000 to $50,0001 pursuant to a planwhich provides that the released capital shall be used toeliminate unsatisfactory assets and that all estimatedlosses and depreciation in securities in the lower gradesnot eliminated by application of the released capital shallalso be charged off, all as set forth in your memorandumof December 15, 1934.

"It is understood that the bank's capital has recentlybeen

isthrough the sale of $100,000 of preferred

stock to the Reconstruction Finance Corporation and/orOthers and that the present plan does not provide for thesale of any additional preferred stock."

Approved.

Two telegrams to Mr. Curtiss, Federal Reserve Agent at the

te.111.1 Reserve Bank of Boston, authorizing him, subject to the con-

-s prescribed in the telegrams, to issue limited voting permitsto !Ifni_'Lie National Shawmut Bank of Boston" and the "Sharmut Associa-

4ctft' both of Boston, Massachusetts, entitling such organizations

to yot

thezro__trill or control in the following banks:

!4?rchant5 National Bank of Salem",Salem, Massachusetts.qi..!2,1nchester National Bank", Winchester, Massachusetts.bc'unam National Bank", Needham, Massachusetts.

°1111tY Bank and Trust Company", Cambridge, Massachusetts.Tilt) to

-"'am authorizing the issuance of a limited permit to the

e, for the purposes set forth in the telegrams, the stock which

h4L4Talltlitzhara Association" also stated that the Board feels that the

TIllst Company Security Fund, as described in the subscription

41'eernent of June 30, 1932, constitutes a liability of the HinghamT t

144-e°111PanY against which could not be properly made the eliminations

'gili/led Of that bank as one of the conditions precedent to the


4002

12/22/34 -7-

issuance of the limited voting permit authorized by the telegram;

that in the event The Merchants National Bank of Salem desires to

lisdkIce its capital stock, the Board will give consideration to a

'flted voting permit for that purpose when and if such capital stock

Ilecluction is approved by the Comptroller of the Currency; that the

tim specified in condition number eighteen of the conditions of mem-

bership of the County Bank and Trust Company, Cambridge, Massachusetts,

withUi Which the Shawmut Association and The National Shawmut Bank

'31'130ston shall each obtain a general voting permit is extended to

'111111e 1) 1935; and that it is requested that the agent advise theal))31.1-444ant5 and the banks accordingly.

Approved.

Telegram dated December 21, 1954, approved by two members of

theBoard, to Mr. Case, Federal Reserve Agent at the Federal Reserve

Qe New York, authorizing him, subject to the conditions prescribedLI t1

to he -e-Legram, to issue a limited voting permit to the "Associates

"14°I'ris County, Inc.", Morristown, New Jersey, entitling such organ-izati

-°11 to vote the stock which it owns or controls in the "FirstIlet14,4

a-3- Bank in Rockaway", Rockaway, New Jersey, for the purposesElet'611 in the telegram.

Approved.

Telegram to Mr. Case, Federal Reserve Agent at the Federalerize

4pank of New York, authorizing him, subject to the conditions

ed in the telegram, to issue a limited voting permit to the

Back Securities Company", Hackensack, New Jersey, entitling


12/22/34 -9-

4003

such organization to vote, for the purposes set forth in the telegram,

the stock which it owns or controls in the following banks:

"Bank of Bogota", Bogota, New Jersey."Fort Lee Trust Company", Fort Lee, New Jersey.

dgefield Park Trust Company", Ridgefield Park, New Jersey."Westwood Trust Company", Westwood, New Jersey.

Approved.

Telegram to Mr. Case, Federal Reserve Agent at the Federal

Reser-v-.e Bank of New York, authorizing him, subject to the conditions

l eribed in the telegram, to issue a limited voting permit to the

44011tcl--,„ir Trust Company", Montclair, New Jersey, entitling such

°rgellization to vote the stock which it owns or controls in "The

4ret m +4-aw4.onal Bank of Cedar Grove", Cedar Grove, New Jersey, for the

Poses set forth in the telegram.

Approved.

Telegram to Mr. Case, Federal Reserve Agent at the Federal

"e Bank of New York, authorizing him, subject to the conditions

P48a1'ibed in the telegram, to issue a limited voting permit to theakhwa

37. Trust Company", Rahway, New Jersey, entitling such organiza-tion t

4440

telegrain.

vote the stock which it owns or controls in "The Rahway

Bankul Rahway, New Jersey, for the purposes set forth in the

Approved.

Telegram to Mr. Fletcher, Acting Federal Reserve Agent atede

ral Reserve Bank of Cleveland, authorizing him, subject totilecorld

iti°n8 prescribed in the telegram, to issue a limited voting


12/22/34 -9-

4004

Permit to the "Monongahela Trust Company", Homestead, Pennsylvania,

e"ling such organization to vote the stock which it owns or

e°14ro1s in "The First National Bank of Homestead", Homestead,

l'elirleYlvania, and 'The Hays National Bank", Hays, Pennsylvania, forthe

Purposes set forth in the telegram.

Approved.

Telegram to Mr. Fletcher, Acting Federal Reserve Agent at

the pederal Reserve Bank of Cleveland, authorizing him, subject to

thee°nditions prescribed in the telegram, to issue a limited voting

to the "Swissvale Trust Company", Swissvale, Pennsylvania,

flg tkt14such organization to vote the stock which it owns or controls

he First National Bank of Swissvale", Swissvale, Pennsylvania,

the

the

the

"Ilditiens prescribed in the telegram, to issue a limited voting

11e4lit to "The Diversified Holding Company",

alich eqamization to vote the stock which it owns or controls in thehkr.


et

Approved.

Teleg ram to Mr. Fletcher, Acting Federal Reserve Agent at

Pecleral Reserve Bank of Cleveland, authorizing him, subject to

8 National Bank in Crestline",

cll'th in the telegram.

,etea

Telegram to Mr.

Reserve Bank of

Galion, Ohio, entitling

CreAline, Ohio, for the purposes

Approved.

Fletcher, Acting Federal Reserve Agent at the

Cleveland, authorizing him, subject to the


4005

12/22/34 —10—

conditions prescribed in the telegram, to issue a limited voting per-

Illit to "The First and Merchants National Bank of Middletown",

Middletown, Ohio, entitling such organization to vote the stock which

it°11116 or controls in "The American Trust & Savings Bank of Middle-

tovmn4 ) Middletown, Ohio, for the purposes set forth in the telegram.

Approved.

Two telegrams dated December 21, 1934, approved by two membersot

""e Board, to Mr. Newton, Federal Reserve Agent at the Federal

'Ye Bank of Atlanta, authorizing him, subject to the conditions

Iltesoribed in the respective telegrams, to issue limited voting permitsto the "Citizens and Southern Holding Company" and "The Citizens and8011th

ern National Bank", both of Savannah, Georgia, entitling such

zatlons to vote the stock which they own or control in "Thefl

--ge National Bank", La Grange, Georgia, and the "Albany Exchange

Bank", Albany, Georgia, for the purposes set forth in theteleartims.

i 0

Approved.

Telegram to Mr. NeTton, Federal Reserve Agent at the FederalBe

Bank of Atlanta, authorizingDte2etia)

ed in the telegram, to voting permit to

" Ilational Associates, Incorporated", Chattanooga, Tennessee,tttitzi

teltg: such organization to vote, for the purposes set forth in the

'44) thestock which it owns or controls in the following banks:"The

Bazilton National Bank of Johnson City", Johnson City,

him, subject to the conditions

issue a limited

"The Tennessee.namblen National Bank of Morristown", Morristown, Tennessee.


4006

12/22/3z, —11—

"The First National Bank of Lenoir City", Lenoir City,Tennessee.

"The First National Bank of Loudon", Loudon, Tennessee."First National Bank in Harriman", Harriman, Tennessee."The First National Bank of Pikeville", Pikeville,

Tennessee."The First National Bank of South Pittsburg, South Pittsburg,

Tennessee.

The telegram also stated that, 1-)rior to the issuance of a permit

erAdt14----Lug the applicant to vote on a proposal to reduce the capital

tc'ek of any of its subsidiary member banks, the details of the plan

Or Plans for such reduction should be submitted to the Comptroller ofthe

Curren and nc and the proposed reduction should be approved by the

a(IP.troller and by the Federal Reserve Board. The telegram also

authorized the agent to amend the standard form of permit by adding

Ileter the name of the grantee the words "or its nominees".

Approved.

Two telegrams to Mr. Newton, Federal Reserve Agent at theNde,'41 Reserve Bank of Atlanta, authorizing him, subject to the

---s prescribed in the telegrams, to issue limited voting

Pt 4-- .0 "The First National Company of Birmingham" and he

41st,1--,-onal Bank of Birmingham", both of Birmingham, Alabama,

tltl lng such organizations to vote, for the purposes set forth in

telegr'ams, the stock which they own or control in the following

"The Woodlawn—American National Bank of Birmingham",Birmingham, Alabama."The

111, Fairfield American National Bank", Fairfield, Alabama.'le Leeds—American National Bank", Leeds, Alabama.

Approved.


111 the

12/22/34

4007

-12-

Telegram to Mr. Peyton, Federal Reserve Agent at the Federal

11ve Bank of MinneaDolis, authorizing him, subject to the conditions

Prescribed in the telegram, to issue a limited voting permit to the

"BankShares Corporation", :Ainneapolis, Minnesota, entitling such

etrganization to vote the stock which it owns or controls in "The

11411.1lette National Bank of Minneapolis", Minneapolis, Minnesota, forthe


Approved.

Telegram to Mr. Peyton, Federal Reserve Agent at the FederalIteeerv.

e Bank of Minneapolis, authorizing him to issue a limited voting

P1414it to the "Northwest Bancorporation", Minneapolis, Minnesota,

'rig such organization to vote, for the purposes set forth in theteleD„

61.142 the stock which it owns or controls in the following banks:

"First National Bank and Trust Company of Aberdeen",Aberdeen, South Dakota.

411:1rst National Bank in Britton", Britton, South Dakota.n, e First National Bank of Groton", Groton, South Dakota..the

s‘armers & Merchants National Bank in Milbank",Milbank, South Dakota.

"First National Bank in Mobridge", Mobridge, South Dakota.4e Redfield National Bank", Redfield, South Dakota.

the

Approved.

Telegram to Mr. Sargent, Assistant Federal Reserve AF:ent at

theciel'al Reserve Bank of San Francisco, authorizing him, subject to

c("tions prescribed in the telegram, to issue a limited voting

244 to the ',Corvallis First National Corporation",itlilig such organization to

"First National Bank of

Corvallis, Oregon,

vote the stock which it owns or controls

Corvallis", Corvallis, Oregon, for the


400812/22/34 -13-

Poses set forth in the telegram.

Approved.

Letter dated December 21, 1934; approved by two members of the

13°ard) to Mr. Crane, Deputy Governor of the Federal Reserve Bank of

114 YOrk)reading as follows:

"Receipt is acknowledged of your letter of December1934, enclosing a copy of your letter of the same

'ate to the Undersecretary of the Treasury suggesting thatYour bank be authorized to publish monthly total short-termf°reign assets and liabilities of banks and bankers in the!econd Federal Reserve district as reported to you on new4°1111s prescribed by the Secretary of the Treasury.

"The Federal Reserve Board regards the publication offigures as a constructive step likely to improve the

f"lic understanding of the international financial position;.f the United States which is one of the factors underlyingfreral Reserve policy. While the publication of monthlysegures would be satisfactory for this purpose, the Board1,_e8 no objection to releasing the figures weekly as theyrcome available. Consideration is being given by theZrd to the desirability of publishing combined figures;L r the twelve Federal Reserve Districts in the Federal°serve Bulletin."

Approved.

Letter to Mr. Case, Federal Reserve Arent at the Federal Re-

11: 13811k of New York, prepared in accordance with the action taken

t4Lleeting of the Board on December 12, 1934, and reeding asrollows:

oth 1 "This refers to your letter of May 31, 1934, and

11(1' letters in regard to the question whether sectionciZ of the Federal Reserve Act limits the amount ofrer,,.'al and surplus of a State member bank which may beQ0;'esented by loans secured by bonds of the United Stateser

nment.eral;Am°ng other things, section 11(m) authorizes the Fed-

eserve Board to fix for each Federal reserve district


4009-14-

"the percentage of individual bank capital and surplus whichmaY be represented by loans secured by 'stock or bond collateral'made by member banks within such district, and provides that'no such loan shall be made by any such bank to any oerson inan amount in excess of 10 per centum of the unimpaired capitaland surplus of such bank.'

"Under the provisions of Section 5200 of the UnitedStates Revised Statutes, the total obligations to any nationalbank of any person, in the form of notes secured by bonds orn?tes of the United States issued since April 24, 1917, arelamited to 25 per centum of the amount of the unimpaired capital&Ilia surplus of the bank and it is understood that it is thePosition of the Comptroller of the Curreilcy that the provisions0f section 5200 with respect to obligations so secured are notrepealed or affected in any way by the provisions of section11(m) of the Federal Reserve Act. Section 5200 is applicable0111Y to national banks, however, and does not affect Statemember banks.

"The language of section 11(m) on this question is clearaad unambiguous and, inasmuch as there is nothing in theection which indicates an intent of Congress to give aceltrictive or limited meaning to the term 'stock or bond

lateral' as used therein, there appears to be no escapefrom the view that under the existing law a State member bank;.Y not lawfully make a loan secured by bonds of the United1:0ates Government to any person in an amount in excess oftaller centum of the unimpaired capital and surplus of the

Ho-:iever, the Federal Reserve Board feels that Statelirlember banks should be placed on a basis of equality in this:Peet with national banks and, accordingly, the Board willthe°mmend to the next session of Congress an amendment toe law for this purpose."

Approved.

Letter dated December 21, 1934, approved by two members of thetoarci

' to Mr. Anderson, Assistant Federal Reserve Agent at the FederalZlzerlre

Ball of Cleveland, reading as follows:

which"This refers to your letter of December 6, 1934, withtil You inclosed a photostat copy of a pamphlet entitledwOyised Condensed Rules of the Federal Reserve Board 1933'TrIlicl,.1 has apparently been distributed by the First—CentraldeposiCjongr

of Akron, Ohio, to some or all of its savings


4010

—15—

"The title 'Revised Condensed Rules of the Federal Re—serve Board 1955' is obviously inap)ropriate and many of theprovisions contained in the pamphlet are not requirementscontained either in the law or in the Federal Reserve Board'sregulations with respect to savings deposits. It is re—quested that you communicate with the First—Central TrustC(laPany calling attention to the title of the pamphlet andto the fact that it may cause misunderstanding or confusionamong the bank's customers, and request that the title be

or changed in some appropriate manner on pamphletsv/hich may hereafter be issued by the bank."

Approved.

Letter to Mr. Zurlinden, Deputy Governor of the Federal Reserve

of Cleveland, reading as follows:

"This refers to your letter of December 3, 1934, ad—dressed to Mr. Smead, Chief of the Board's Division of BankoPerLctions, and its inclosure, with regard to loans under87,0tion 13b of the Federal Reserve Act against the security°I chattel mortgages in the State of Ohio.

"It appears that it is often to the advantal,e of thebo rr°wer that a loan under the provisions of section 13bof the Federal Reserve Act be (lisbursed in installments,the amounts disbursed bear interest at the rate of 6%

rer annum and the amounts undisbursed for which the Federal4 serve bank is committed carry a fee of 2% per annum. Itre8 understood that under the lay of the State of Ohio withgard to the recording of chattel mortgages, an affidavit

Zst be made by or on behalf of the mortgagee stating thezoount of the loan which has been disbursed and that thetortgage is regarded as validly recorded only with respectthe the . amount counsel stated. It is stated by your cosel that

eitherdis ,

bursement referred to in the affidavit may be madekJiY payment of cash or by the establishment of an

lille°nditional credit in favor of the borrower.f,, "Under the proceuure which has heretofore been

by the Federal reserve bank in connection with a.L0411stz,t under section 13b secured by a chattel mortgage in theree e of Ohio, it is necessary to search the indices in theD104rder'5 office and to file a copy of the chattelthe 2ge an an affidavit by the mortgagee setting forththe t of the outstanding debt, not only at the timeover-Lnitial installment is disbursed but also upon paying

to the borrower any subsequent installment on the loan.


401112/22/3,1.

-16-"In order to eliminate this additional labor each time aninstallment is disbursed, it is proposed to give to theborrower, at the time of the closing of the loan, acashier's check for the amount he then needs and toestablish a credit in his favor on the books of the Federalreserve bank for the undisbursed balance. It is understoodthat it is the opinion of your counsel that under thisProcedure the chattel mortgage, at the time of the closingOf the loan, may be validly recorded in the full amount ofthe loan including all subsequent installments. It is alsothe opinion of your counsel that such procedure is withinti?e authority of the Federal reserve bank and in this connec-tion he calls attention to the provision of section 4 of the!'ederal Reserve Act which authorizes a Federal reserve bankt° exercise such incidental powers as shall be necessary tocarrY on the business of banking within the limitationsPrescribed by the Federal Reserve Act.

"It is understood that the credit which would beeEtablished in favor of the borrower under the proposedI?rocedure as above outlined would be unlike an ordinarylePosit account in that the amount of the credit could notrIalL!inY event be increased (except possibly through the(tr).ne of a new loan) and would not be subject to with-4..,awal except through the issuance of cashier's checks from

to time by the Federal reserve bank in disbursingstallments of the loan.?IUpon the basis of the information stated, it appears

t° the Board that the establishment of such credits infay—e,o;'4 of borrowers is necessary in carrying out in an01,'-icient and practical manner the purposes of section 13b,e the Federal Reserve Act in connection with loans on the4curitY of chattel mortgages in the State of Ohio; and youobei advised that the Federal Reserve Board will offer nobo'ection to the establishment of credits in favor of suchAlarI rs in the circumstances and for the purpose described.W such credit so established should be included by the'eral reserve bank on Form 34 opposite the item 'OtherePosits t

Approved.

ea Letter to Governor Geery of the Federal Reserve Bank ofkt

14311e, reading as follows:

28) l eceipt is acknowledged of your letter of Novemberby () 714 With inclosures, in regard to the application

Potter, Greenough, Montana for a loan under


4012

12/22/34: —17—

"section 13b of the Federal Reserve Act to provide workingcapita for a dude ranch. The application was denied byYour bank on the ground that the dude ranch should be classi—fied as a 'hotel' and, consequently, could not be consideredan 'industrial or commercial business' within the meaningof said section 13b.

"It appears that the position of your bank was based111-)on an opinion of your counsel that, in the absence of aruling of the Board to the contrary, a hotel may not beclassified as an 'industrial or commercial business' withinthe meaning of section 13b. Although in a narrow sense theterm 'commercial' may be limited to the purchase and saleor the exchange of goods and commodities, in a broader senseit embraces many other phases of business activity andtercourse. Although not expressly so stated in the

ztetute itself, the evident purpose of section 13b is tornailltain and increase the employment of labor, and the Boardt

!lieves that the words 'industrial or commercial business'should be given a liberal interpretation in order to carry_14 thatbuch bu

purpose and make 'working capital' available tosinesses.

the Board

a liberal rather than a narrow interpretation,1,1,.! Board feels that the term 'commercial business' may'Icve a broader significance than that suggested by your

Znsol and is sufficient to include the operation of ae1 as a business undertaking. Accordingly, it is thevin, of the Board that a hotel of the ordinary and usualmaY properly be considered a commercial business

vii01n the meaning of section 13b and that, if the factskrell respect to the operation of the dude ranch in questionsez such that it should be regarded for this purpose in the

144....?tegory as a 'hotel', the Federal reserve bank maytwori'ctlY make a loan for the pur )ose of furnishing it withotbe,ing capital', provided, of course, that such loan

lise meets the applicable requirements of the Act.be . It is suggested therefore that further considerationabcren to this case in the light of the views expressedAcivi:• If, upon such reconsideration by the Industrialthe ps clrY Committee and by your bank, it is determined thatcTPlication should not properly be granted for anyLhe ) 14 is suggested that you advise the applicant that

l'ee'11PPlication has been reconsidered d state yoursotis an

for declining to make the loan."

Approved.


4013

12/22/3:: —18—

Letter to Mr. Fletcher, Acting Federal Reserve Agent at the

Federal Reserve Bank of Cleveland, reading as follows:

"The Board has reconsidered the application ofMr. D. H. Kirwan, Lima, Ohio, for permission under theprovisions of the Clayton Act to serve at the same timeas director of 'The National Bank of Lime', Lima, Ohio,and 'The Farmers National Bank of Plain City', PlainCity, Ohio, and upon the basis of the information beforeit, including that submitted with your letter of Novem—ber 16, 193;, has granted a permit to the applicant forthe period ending December 31, 1935. The original andcopies of the permit are inclosed for transmittal by youtO the applicant and the banks involved. There is alsoinclosed a copy for your files.

"In considering this application the Board notedthat Mr. Kirwan has been unable to maintain his usualcontact with the Plain City bank because of illness andthat he expects to arrange his affairs so that he canattend meetings of the directors of the Plain City bankwith reasonable regularity in the future. The Board'sl_ction in a-oproving Mr. Kirwan's application has beenL'ased, in part, upon information obtained from the filesc3f the Reconstruction Finance Corporation, and there is!ttaohed for your confidential information a copy of the'11Pplementa1 memorandum prepared by the Board's Divisionof

Examinations with respect to the application.

ar "When transmitting the permit to the applicant yourequested to call his attention to the expiration

.?.F the permit on December 31, 1935, and to advise himrat the Board feels that a director should have a

rtisfactory record of discharging his duties andoefsPonsibilities by participating in the determinationat4.the policies of a bank which he is serving, includingto'endance at directors' meetings. You are also requested

T:dviEle him that if he desires to serve the banks afterti*:lu date, the Board will be pleased to give considerationBo:" new application submitted in accordance with thehifdIS Regulation L, if accompanied by a statement of

intentions with respect to his attendance atectors' meetings."

Approved.

Letter dated December 21, 1934, approved by five members oft,4 130

1/1s(1) to Mr. Hoxton, Federal Reserve Agent at the Federal Re—


4011.

12/22/3/1 —19—

serve Bank of Richmond, reading as follows:

"The Board has reconsidered the application of Mr.H. B. Martin, Thompson Hotel Building, Elkins, WestVirginia, for permission under the provisions of theClayton Act to serve at the same time as director of'Citizens National Bank of Elkins', Elkins, WestVirginia, and as Jirector of Bank of Adrian, Adrian, WestVirginia, which was not approved as indicated in theBoard's letters of June 131 and July 18, 1934, to you.Upon the basis of the information now before it, includingthat submitted from time to time by your office, and inaccordance with the recommendation contained in yourletter of December 121 1934, the Board has approved theaPPlication. There are inclosed the original and copiesof the permit granted to Mr. Martin for transmittal byyou to the applicant and the banks involved. A copy isalso inclosed for your files."

Approved.

Letters to applicants for permits under the Clayton Act,

of approval of their applications as follows:

14./I:, E. W. Chase, for permission to serve at the same

City, as a director of the Oil City National Bank, Oil

'1311tY, Pennsylvania, and as a director of the Citizens"-king Company, Oil City, Pennsylvania.

H. J. Crawford, for permission to serve at the sametime eS a director and officer of the Oil City National_Tlk, Oil City, Pennsylvania, as a director and officern,the Citizens Banking Company, Oil City, Pennsylvania,Zncl as a director and officer of The First National"44k of Emlenton, Emlenton, Pennsylvania.

Walter R. Reitz, for permission to serve at the sametime as a director and officer of the Oil City NationalOil City, Pennsylvania, and as a director and

sl'-leer of The Union National Bank of Sistersville,stersville, West Virginia.

t4r.t.-fl'

". B. Spann, for permission to serve at the sameBnwe, as an officer of The Citizens and SouthernNational

Savannah, Georgia, and as a director of theG lzens and Southern Bank of Thomaston, ThoLiaston,e°rgia.


4015

-20—

John E. Wallace, for permission to serve at the sametime as an officer of The Citizens and Southern NationalBank, Savannah, Georgia, as a director and officer of theAlbany Exchange National Bank, Albany, Georgia, and as adirector and officer of the Citizens and Southern Bank ofThomaston, Thomaston, Georgia.

Approved.

Thereupon the meeting adjourned.

Secretary.

Governor.


19341222_minutes.pdf

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